Shell China Exploration and Production Company Limited has
acquired a 55-percent equity interest in a coal-bed methane venture
in north China's Shanxi Province and will take over as its
operator, said sources with the company on Thursday.
This was the first contract signed by Shell to develop China's
rich coal-bed methane resources. China has 31 trillion cubic meters
of coal-bed methane resources with 16 trillion considered to be
According to a white paper titled China's Energy Conditions and Policies
published on Wednesday, China will encourage the development of
coal-bed methane and foreign investment in unconventional energy
exploration and development.
China's Ministry of Commerce recently approved an agreement for
Shell to acquire Canada-based Verona Development Corporation's
majority equity position in a 30-year production sharing contract
(PSC) covering the North Shilou block, an area of 1,015 square
kilometers in the eastern part of the Ordos Basin.
Verona maintains a 5-percent interest in the venture, with China
United Coalbed Methane Company (CUCBM) holding the remaining 40
The exploration phase of the PSC will end in December 2010.
Following this, the PSC stipulates five years of development and a
20-year production period.
A comprehensive appraisal program, comprising 2D seismic
acquisition and the drilling of pilot wells, will start early next
Lim Haw-Kuang, Executive Chairman of Shell Companies in China,
said that the North Shilou PSC was another important step for the
Shell Group in developing a significant, long-term business in
China and globally.
Shell is confident that its upstream technologies and expertise
can help unlock the vast potential of coal-bed methane in China,
This is Shell's third upstream PSC venture in China, after the
Xijiang offshore oil development in the South China Sea with CNOOC
and ConocoPhillips and the Changbei gas field in the Ordos Basin
CUCBM signed a PSC with Verona covering the North Shilou block
in 2005, in which Verona holds a 60 percent equity interest and
CUCBM 40 percent.
Following the cooperation agreement with Shell, CUCBM hopes that
more international energy giants would enter China's coal-bed
methane exploration field, said Sun Maoyuan, general manager of the
CUCBM is China's major coal-bed developer, with PetroChina and
China National Coal Group holding 50 percent shares each.
(Xinhua News Agency December 28, 2007)